Tag Archives: May-June 2008

Healthcare construction projects are on the rise in Arizona and across the United States. Spurring the increase is competition among hospitals, aging facilities, growing populations and demand for new and changing healthcare technology. Industry experts estimate the boom will exceed $60 billion a year by 2010.

Construction costs are also soaring and putting pressure on an already stretched healthcare system. Between 1999 and 2006, construction costs in San Francisco jumped from $190 PSF to over $600 PSF. They also rose dramatically in the Phoenix market. Kip Edwards, system vice president for design and construction of Banner Health, created the following chart to illustrate cost escalation between 2004 and 2009.

“Our biggest challenge is always cost,” says Edwards. “It used to be $1 million a bed to build a hospital, but now it’s closer to $2 million.”

Edwards says one of the biggest factors driving capital costs is Information Technology. Hospitals and medical facilities at one time budgeted hundreds of thousands of dollars to pay for IT, but now must budget millions. Additional resources are also necessary to create flexibility for future growth, such as producing excess capacity for the continued addition of information systems, sizing up computer closets and HVAC systems and adding extra electrical power for future needs.

Healthcare Technology: Building Information Modeling (BIM)

To help manage these growing costs, many healthcare construction teams are using BIM, a technological tool designed to detect problems prior to construction and reduce downtime in the field. BIM enables users to create a virtual 3D model of an entire building, including walls, finishes, heating and air conditioning, plumbing, electrical, etc. Each trade creates its own 3D model at the start of a project. The models are then imported into a software program called Navisworks, which analyzes the drawings to detect collisions in the project.

Sharon Harper, CEO of The Plaza Companies, contends BIM is one of the most important pieces of technology used to develop healthcare facilities today.

“Healthcare facilities are extremely complex and each area has specific challenges,” she says. “The ceiling in an operating room, for example, is full of pipes and ducts because the room has special air requirements. With BIM, we can build all that into the model and then run conflict resolution to maintain control over what goes into the ceiling. BIM helps us optimize the design, and make it better and less costly.”

Information Highway

Server-based project management systems are also widely used today to help run healthcare construction projects. Orcutt|Winslow, a Phoenix-based architectural firm, creates a Web site for each of its projects through an online database they call Virtual Project. Members of the construction team can log onto the Web site anytime from anywhere, and check the progress of the project. They can also look at staff hours, schedules, updates, construction documents, the project’s budget and floor plan.

“The Web sites allow our project teams to share information quickly and effectively,” says Neil Terry, a partner at Orcutt|Winslow. “Before Web sites, we used scanners and fax machines and e-mailed PDFs. But e-mail has limitations on the size of file you can send, whereas any size file can be uploaded to a Web site.”

Computerization

Steve Steinberg, former senior director of Lauth Property Group, says great advancements in healthcare and the market sector’s construction have taken place over the last five years, due to the computer and its ability to analyze information quickly and distribute it globally. He also contends that healthcare delivery is on the cusp of a paradigm change.

“The face of healthcare delivery is changing,” Steinberg says. “Hospitals are becoming infused with research and development components so delivery of care will become more personalized and specific to a person’s profile. That means hospitals will have doctors and nurses, plus added care givers like scientists, on their team who will advise on genetic and molecular levels and create treatments that are custom-designed for each person.”

Per Diem Offices

UTAZ Development in Gilbert is building medical per diem offices in several locations around the Valley to help attract doctors and specialist to local hospitals.

The purpose of the per diem offices is twofold: (1) to provide physicians and healthcare practitioners an opportunity to establish a new practice or expand an existing practice in a new community; (2) and to provide temporary medical offices for practitioners waiting for new office space to be completed.

The daily, short-term lease rates associated with these per diem offices allow the practitioner flexibility in the number of hours and days they will occupy the space, thus minimizing the cost and risks associated with typical lease terms.

“This concept is not unlike the executive office suites created for general office use,” says Terri Tobey, senior vice president of sales and marketing for UTAZ. “The difference is that the UTAZ per diem offices are designed specifically to accommodate the medical user.”

The 1,500 SF per diem offices include architectural and design features that create a welcoming and healing environment. Each office also has a procedure room and basic exam rooms that are fully furnished and stocked with basic medical supplies, as well as individual locked storage for each lessee to secure their own specific supplies.

Physician and healthcare practitioners can lease the space on a per-day or per half-day basis, one to six days per week. Lease rates are $150 per half day, $300 for a full day. Terms can be as short as six months or as long as two years.

UTAZ provides all basic medical supplies such as exam table paper, cotton swabs, tongue depressors and other disposals. They also supply basic exam equipment such as otoscopes, blood pressure devices and thermometers, as well as office equipment such as phone, fax and copy machine.

“We’re trying to help the Valley attract doctors and specialists,” Tobey says. “There’s still a great need for medical professionals in Arizona. The challenge is finding the perfect location with the attributes needed for success.”

The growth Phoenix has had in recent years equates to growth in the medical needs of its population. In turn, a greater number of medical facilities are needed within a broader area. The large inner city hospitals and satellite clinics that dominated healthcare for so long are no longer adequate to meet all of our healthcare needs, not because of a lack in quality of care, but because of proximity to the patient.

Sooner or later an organization that provides medical care must acquire a site to better serve the patient population base. The selection, evaluation and acquisition of a new site is unique, more complicated and more likely to run afoul than other non-medical site acquisitions if all of the issues are not identified and addressed before the site is acquired. The following are a few of the issues that a medical care provider must consider before closing on the purchase of a site.

The Contract:

The contract to purchase the site must be carefully negotiated. In the case of medical care facilities, there are at least two issues of particular note: (i) the due diligence period must be long enough to accommodate multiple inquiries and analysis well beyond even the most complex transactions; (ii) if the medical care facility is part of a larger complex, or the seller owns other adjoining property, a set of deed restrictions against the seller’s property should limit or prohibit other competitive medical care providers or incompatible uses of the adjoining property, and the provider should be entitled to enforce the restrictions.

Zoning:

The first step is ensuring that the zoning permits medical care, including the type of medical care, procedures and patients that will be at the facility. The zoning should be comprehensive and there should be no requirement for a special-use permit or further governmental action.

Rezoning Contingency:

If a rezoning special-use permit is required, the contract should provide for an adequate period of time for the medical care provider to acquire the approval or otherwise terminate the contract.

Title Review:

Title should not preclude the variety of activities incidental to medical care, typically involving noise, radiation hazards and environmental and waste materials, which are all commonly prohibited.

Parking:

Medical care facilities require substantial parking. The adequacy and proximity of parking should be confirmed as part of the zoning, any deed restrictions and as a practical matter. There should be the ability to park undercover and immediately adjoin the facility.

Governmental Incentives:

The medical care provider should look at several sites in several different jurisdictions. Most jurisdictions are seeking a greater core for their constituents and some may have the flexibility to offer incentives to induce the provider to locate within its boundaries.

Developer Incentives:

Private developers with a large development may see a medical care facility as a highly desirable amenity to the project. They have an opportunity to seed the development and will grant substantial concessions in price, location, access, infrastructure and signage, just to name a few.

Utility, Other Needs and Incentives:

Larger medical facilities also can require substantial and reliable utility needs. The utilities may be willing, particularly in conjunction with a developer and governmental jurisdiction, to upgrade services from the entire grid by construction of additional substations, wells or plant capacity to meet the needs of the facility.

Specialty Uses:

Some medical care facilities present unique issues, in particular drug abuse/half-way houses or full-care psychiatric facilities. The problem most commonly encountered is finding a location that has the proper zoning and no other restrictions on what would be viewed by neighboring properties as highly undesirable. The provider does not want to acquire a site that requires the approval of what would be certain opposition.

Expansion:

Ultimately, the provider has to look far enough into the future to ensure that it has acquired, or has an option to acquire, a right of first refusal that will give the provider a measure of comfort that, if the need arises, it can still expand and provide centralized service for an extended time. This is not just a question of the amount of land, but the adequacy of the utilities and all other issues revisited as well.

Looking Ahead:

The most valuable part of the process is looking ahead and anticipating to the extent possible what healthcare will look like in the future and determine that there are no constraints to meet those needs.

For more information about Jennings, Strouss & Salmon and acquiring sites for medical facilities, visit jsslaw.com.

Bruce B. May is a real estate lawyer with Jennings, Strouss & Salmon’s Phoenix office. He represents national, regional and local developers, homebuilders, and institutional and individual investors involved in all phases of the investment and development process. He can be reached at 602-262-5923 or Bmay@jsslaw.com.

If you asked people how they envision a medical facility, most would respond with an image of large lobbies, endless hallways and patient rooms with a draft. However, ask an architect who specializes in medical design and the answer is quite different.

Healthy Implementation For The Healing Environment — with Medical Design

“For more than a decade, the healthcare industry has been borrowing design concepts as well as ideas regarding amenities from the hospitality market to create an inviting, healing environment,” says Mo Stein, FAIA, principal of HKS Inc. “The idea behind it is simple — hospitality equates to relaxation, comfort and convenience. Today’s sophisticated healthcare subscriber demands all of these elements.”

The first step in creating a healthy environment, says SmithGroup Phoenix’s Vice President Mark Patterson, AIA, is defining the facility’s users.

“We utilize elements of Evidence-Based Design to create environments that are therapeutic, supportive of family involvement, efficient for staff performance and restorative for workers under stress,” he says. “Because healthcare facilities can be stressful environments, it is important to design spaces that are comforting, as well as highly functional.”

Neil Terry, AIA, director of healthcare for Orcutt|Winslow, agrees that seeking and obtaining healthcare is often a stressful and traumatic experience, and that the environment is key to helping create a better patient experience.

“Creating a healing environment can be as simple as using materials and colors that promote a more familiar, home-like experience,” he notes. “It can include the use of elements that are known to be soothing to the human psyche. A healing garden with running water is a very effective approach; providing family space within the patient room, where they become part of the healing process as opposed to an intruder to the care giving.”

“Pleasant diversions are included to minimize the stress for those waiting, or for the professional staff who work in a high-stress environment,” she says. “(Additional) space is included to support the family-centered concepts, which provides the social support essential for healing and psychological well-being.”

Evidence-Based Design

Terry defines Evidence-based Design (EBD) as using practices in healthcare design that are proven to promote good outcomes in the healing process.

“Often these practices result in higher construction costs,” he says. “EBD was developed as a way of showing that the benefits of EBD outweigh the costs to implement them.”

Stein adds that designing a facility based upon EBD results in improved patient outcomes, staff and visitor satisfaction, and operational efficiency.

“By keeping abreast of current research, we always strive to infuse any healthcare facility with the latest methods for improving outcomes,” says Richard Beach, AIA, managing principal and lead medical planner for Gresham & Beach Architects. “This can be done through the use of appropriate lighting levels, flooring materials that are easier to navigate and not slippery, patient bed positioning for reduced travel distance to bathrooms, conveniently located hand-wash sinks that discourage the spread of infection, etc.”

Abou-Haidar adds that several EBD projects the company has completed have reported a beneficial impact on several organizational and human variables, including incremental changes in market share; satisfaction level of patients, staff and physicians; retention and turnover rates of nursing staff; and labor costs per patient encounters.

Building Information Modeling (BIM)

“We think of research facilities as highly sophisticated machines that are driven by complex mechanical, electrical and plumbing systems,” says Mark Kranz, AIA, principal of SmithGroup Phoenix. “The BIM process allows us to be miles ahead of the curve in terms of coordination and collaboration with contractors and subcontractors.”

Stein adds that new technology is taking the integrated approach to an entirely new level.

“BIM allows architects to explore complex architectural geometry with a realistic and intelligent model, which is seamlessly integrated with construction documents,” he says.

According to Patterson, the BIM process reflects the way architects really work.

“We think graphically in three dimensions and BIM facilitates communication with our clients, helping to express our three dimensional concepts and designs more accurately,” he says.

Terry adds that with BIM’s 3D modeling, a change to the floor plan automatically alters the elevations, enabling designers to see when conflicts occur and correct the design. The design tool also allows architects to see when systems collide with each other, which helps in correcting a problem before the project gets to the construction phase.

“We also use BIM to allow the user to see spaces in virtual reality,” Terry notes. “This is important for having the user help us in determining the proper placement of medical gases and other equipment, so they can be where they are most effective to the care giver.”

Healthcare Design Challenges

Each medical facility type has its own unique challenges, with hospitals being the most challenging because of all the different elements that go into them, Terry says.

“Components range in complexity from the hospital administration to heart transplant surgical suites, each with its own unique requirements,” he explains. “Hospital design can be compared to conducting a 150-piece orchestra as opposed to a medical office suite, which is like leading a musical quartet. The ‘conductor’ must know how to design each specific area, and be able to coordinate all the systems that go into that area, times the number of areas that need to be designed.”

Adding renovations to an existing medical facility creates an even bigger design challenge. Renovations and expansion projects offer major challenges compared to new construction.

“Older systems may need to be connected to new systems, and that offers a unique set of challenges,” Abou-Haidar notes. “Additional issues include the possible presence of asbestos and lead paint, parking deficiencies, dust control, noise, as well as other issues. All of these are causing many institutions to construct replacement facilities with the latest technology systems and consumer-focused amenities.”

In the 25 years Gresham & Beach Architects has been designing healthcare facilities, Beach says it has encountered many “tough” design challenges. Two specific projects Beach remembers involved significant expansions to the existing building, along with extensive renovations and remodeling within occupied space.

“Each required multiple construction phases, maintaining the operations of the hospital during construction and careful planning to maintain infection control,” he says.

Solutions Beach observed through these challenges included documenting and thoroughly understanding the processes used by the medical staff; developing a logical approach to solving space problems; establishing priorities for phasing the design and construction; and empowering a user/facilities/design/builder team to identify issues and resolve conflicts before they became insurmountable.

Another solution, as it relates to upgrading a healthcare facility’s technology, is careful integrated design and early involvement of the contractor through the design assist process, Abou-Haidar says. Taking these steps has allowed her company to turn these types of challenges into opportunities.

Healthy Balance

Collaboration is a key element of project success, Patterson says. It’s important to strive to develop a true understanding of where each stakeholder’s expectations lie and where those expectations originate, he adds.

“For example, when planning a surgery suite, we interview surgeons, nurses, patients, house keeping staff, etc., to understand how they intend to use the facility and how the design of that facility affects their individual function,” Patterson says. “The most fulfilling part of our job is finding that we were in some way able to help implement a more effective or agreeable way for stakeholders to interact with the space and one another.”

Successful projects, Stein says, are the result of a high degree of involvement by the client at each stage of project development.

“We encourage consensus building among the users and other concerned groups in the design process,” he says. “We accomplish this through active discussion and work sessions with owner representatives and most essentially, users.”

Abou-Haidar points out that part of obtaining a healthy balance within the design of healthcare facilities includes incorporating and anticipating the ever-increasing level of computerization within the healthcare industry. Computerized healthcare programs include electronic medical records (EMR); computerized physician order entry (CPOE); point of service electronic documentation with hand-held devices or voice activated systems; digital imaging and archiving systems; wireless medical diagnostic and monitoring devices; nurse call systems that electronically track the nurses’ locations; and robotic systems for material management and distribution.

“All of these systems require a tremendous network fail-safe infrastructure, a data control center for centralized monitoring and multiple communication rooms to manage the structured cabling systems,” Abou-Haidar says.

Trends for Future Healthcare

“We’re seeing the rapid development of changing technology having the most significant impact on the design of research facilities,” Kranz says. “The other significant change we’re seeing is a transformation from the traditional biology or chemistry wet lab environments of the past to much more interdisciplinary and ‘drier’ research environments, where a significant portion of the research is more equipment- and computer-based, not necessarily requiring a wet bench environment. Bioinformatics, for example, is a bright new field that uses computers to store, search and characterize the genetic code of genes, the proteins linked to each gene and their associated functions.”

In terms of future trends, Patterson says one of the most exciting involved the integration of research and healthcare, which is known as translational care.

“This will mean that a patient’s course of treatment will be very customized for their individual genetic composition,” he says.

Another trend Patterson points out is the development of nanotechnologies that will support fewer and fewer invasive procedures.

“This, along with the advances of bio-interface application as seen in the development of smart prosthetics, are allowing individuals to not just live longer, but enjoy more active lives,” he says.

Beach notes that other upcoming trends for the medical field include continued reduction in patient lengths of stay; increased reliance on technology for procedures; and increased patient involvement in treatment alternatives and decision making.

“In the healthcare industry, the only thing safe to assume is that change will occur in the future,” Stein says. “The difficulty is in predicting what exactly it will be and when it will occur.”

Stein incorporates a look at several “megatrends” that are driving the accelerating rate of change in healthcare — rising public expectations, cost containment, advancing technology, computerization, communications, and telemedicine.

“Under this era of technology-intensive healthcare,” Stein says, “facilities must continue to balance high-tech with high-touch. Personal contact, caring service and genuine concern for patients should never be replaced by technology. In this new environment, facility design will become an important marketing tool. The creative architectural firm will be able to contribute to creating an environment that supports the strategic goals of the organization.”